Question

LLC Net Income and Statement of Members' Equity Marvel Media, LLC, has three members: WLKT Partners, Madison Sanders, and Observer Newspaper, LLC. On January 1, 2012, the three members had equity of $255,000, 565,000, and $155,000, respectively. WLKT Partners contributed an additional $60,000 to Marvel, Media, LLC, on June 1, 2012. Madison Sanders received an annual salary allowance of $147,900 during 2042. The members' equity accounts are also credited with 18% interest on each member's January 1 capital balance. Any remaining income is to be shared in the ratio of 4:33 among the three members. The revenues, expenses, and net income for Marvel Media, LLC, for 20Y2 were $711,266, $211,266 and $500,000 respectively. Amounts equal to the salary and interest allowances were withdrawn by the members. a. Determine the division of income among the three members. If an amount box does not require an entry, leave it blank. Schedule of Division of Income WLKT Partners Madison Sanders Observer Newspaper, LLC Total Salary allowance Interest allowance $ Remaining income (4:33) Net Income b. Prepare the journal entries to close the (1) net income and (2) withdrawals to the individual member equity accounts. For a compound entry, if an amount box does not require an entry, leave it blank. 000000 10000 DOOD C. Prepare a statement of members' equity for 2012. If an amount box does not require an entry, leave it blank. Marvel Media, LLC Statement of Members' Equity For the Year Ended December 31, 2042 WLKT Partners Madison Sanders Observer Newspaper, LLC Total Balances, January 1, 2012 Capital additions Net income for the year Member withdrawals Balances, December 31, 2012 d what are the advantages of an income-sharing agreement for the members of this LLC? Without an income-sharing agreement, each member be credited with an equal proportion of the total earnings, or one-third each. Separate contributions be acknowledged in the income-sharing formula.

Answer 1

a. Division of income among the three partners is as follows:

Total Schedule of Division of Income Observer WLKT Madison Newspaper, Partners Sanders LLC Salary allowance 1,47,900 Interest allowance 45.900 11,700 27,900 Remaining income (4:33) 1,06,640 79,980 79.980 Net income 1,52,540 2,39,580 1,07,880 1,47,900 85,500 2,66,600 5,00,000

b. Journal entries to close Net income and withdrawls to individual equity accounts is as follows:

5,00,000 1,52,540 2,39,580 1.07.880 Net Income: Profit and Loss Capital Account - WLKT Partners Capital Account - Madison Sanders Capital Account - Observer Newspaper, LLC Withdrawls: Capital Account - WLKT Partners Capital Account - Madison Sanders Capital Account - Observer Newspaper, LLC Cash 45,900 1,59,600 27,900 2.33.400

c. Statement of members equity for 20Y2 is as follows:

Total Marvel Media, LLC Statement of members' Equity For the Year Ended December 31, 20Y2 Observer WLKT Madison Newspaper, Partners Sanders LLC Balances, January 1, 20Y2 2,55,000 65,000 1,55,000 Capital additions 60.000 2,55,000 1,25,000 1,55,000 Net income for the year 1,52,540 2,39,580 1,07,880 4,07,540 3,64,580 2,62,880 Member withdrawls 45,900 1,59,600 27,900 Balances, December 31, 2013,61,640 2,04,980 2,34,980 4,75,000 60.000 5,35,000 5,00,000 10,35,000 2,33.400 8,01,600

d. Without an income-sharing agreement, each member shall be credited with an equal proportion of the total earnings, or one-third each. Separate contribtuions would be acknowledged in the income-sharing formula.